Government & Private Bank Foreclosure

By Business & Finance Last updated Monday, April/15/2024

Government Foreclosure

The Federal Housing Administration insures some loans to allow people with poor credit and a low down payment. to buy homes. FHA-insured loans still come from a lending institution, but the government underwrites the loan, agreeing to compensate the lender if the borrower defaults. The mortgage insurance costs are assumed by the borrower and incorporated into the monthly mortgage payments. In the event of a defaulted loan, the government can foreclose on the property and sell it at auction. Government foreclosure can also occur if you fail to pay your taxes. Proceeds from the property sale go to pay off the loan (or taxes) and any associated legal fees.

A private bank foreclosure works in much the same way as a government foreclosure. When the loan is not FHA-insured, the government is not a player and does not initiate the foreclosure process. In the case of a mortgage agreement, the bank or lending institution holds the title to the house until the loan is paid, and can foreclose in the event of missed payments.

If you are in danger of losing your home to foreclosure, there is help available. In an effort to stabilize the housing market and lessen property foreclosures, the Obama administration initiated the Making Home Affordable program. It is aimed at helping homeowners modify their home loans so they are affordable. If the financial burden is simply too much, MHA also has a program to help free you from the property, with $3,000 in relocation assistance. This is achieved through a deed in lieu of foreclosure, in which you voluntarily transfer the property title to the lender. The lender agrees to cancel your mortgage debt, even if the value of your property is less than what you owe. The Hope Now Alliance also offers assistance to struggling homeowners through a national network of counseling services, informative events and access to information on mortgage relief options.

There are scam artists trying to take advantage of people desperate to keep their homes. They make fantastic promises, with claims of high success rates; some may even say they are from government agencies. Before you accept help from any company offering mortgage assistance relief, there is one fundamental rule to keep in mind: never, ever pay them any money upfront. It is illegal for them to collect fees before you have been offered mortgage relief from a lending institution and accepted it.